REUTERS - The Sri Lankan rupee traded stronger yesterday as a foreign bank sold dollars while importers buying greenback slowed down as they awaited further appreciation, dealers said.
The rise also comes as the government is increasing its three-year loan to $700 million from an initial target size of up to $500 million, in the country’s largest syndicated facility. At 0800 GMT, the spot rupee was at 145.65/75 per dollar, firmer from Thursday’s close of 145.80/90, while one-week rupee forwards were at 145.85/90 compared with the previous day’s close of 146.00/10 per dollar.
“The rupee rose because a foreign bank sold dollars that came from foreign investors to buy local bonds,” a dealer said asking not to be named. “We did not see any central bank intervention today as well.”
Central Bank officials were not available to comment on whether it had stopped giving direction on the spot rate. On Thursday, dealers said the central bank had stopped giving a reference rate to the market.
The rupee has been steady for more than a week as dealers hesitated to trade the local currency below 145.50 per dollar in anticipation of Central Bank intervention to defend the rupee.
The spot rupee is usually managed by the central bank, and market participants use the forward market levels for guidance on the currency. Sri Lanka’s Central Bank retired around $470 million worth of Sri Lanka Development Bonds last week, instead of re-issuing them, using the inflows the country got from a syndicated loan recently, a Central Bank official told Reuters on Tuesday. The move may put pressure on the country’s reserves, dealers said.
The Central Bank has largely not intervened to defend the rupee ever since a dual-tenure sovereign bond issue raised $1.5 billion in July.
Net foreign inflows into government securities have jumped 28.5 percent to Rs.295.7 billion ($2.03 billion) through Aug. 17 since the International Monetary Fund approved a three-year, $1.5 billion loan on June 4, according to the latest Central Bank data.
Meanwhile, Sri Lankan shares fell, with the benchmark Colombo stock index slipping 0.38 percent to 6,564.99 as of 0810 GMT. Turnover stood at Rs.556.7 million ($3.82 million).